Correlation Between Charoen Pokphand and Bangkok Bank

Can any of the company-specific risk be diversified away by investing in both Charoen Pokphand and Bangkok Bank at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Charoen Pokphand and Bangkok Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Charoen Pokphand Foods and Bangkok Bank PCL, you can compare the effects of market volatilities on Charoen Pokphand and Bangkok Bank and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Charoen Pokphand with a short position of Bangkok Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Charoen Pokphand and Bangkok Bank.

Diversification Opportunities for Charoen Pokphand and Bangkok Bank

-0.59

Correlation Coefficient

Charoen Pokphand  Bangkok Bank

Excellent diversification

The 3 months correlation between Charoen and Bangkok is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Charoen Pokphand Foods and Bangkok Bank PCL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bangkok Bank PCL and Charoen Pokphand is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Charoen Pokphand Foods are associated (or correlated) with Bangkok Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bangkok Bank PCL has no effect on the direction of Charoen Pokphand i.e., Charoen Pokphand and Bangkok Bank go up and down completely randomly.

Pair Corralation between Charoen Pokphand and Bangkok Bank

Assuming the 90 days trading horizon Charoen Pokphand Foods is expected to generate 1.89 times more return on investment than Bangkok Bank. However, Charoen Pokphand is 1.89 times more volatile than Bangkok Bank PCL. It trades about 0.04 of its potential returns per unit of risk. Bangkok Bank PCL is currently generating about -0.01 per unit of risk. If you would invest  2,300  in Charoen Pokphand Foods on December 31, 2024 and sell it today you would earn a total of  90.00  from holding Charoen Pokphand Foods or generate 3.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Charoen Pokphand Foods  vs.  Bangkok Bank PCL

Charoen Pokphand Foods

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Charoen Pokphand Foods are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent technical and fundamental indicators, Charoen Pokphand is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Bangkok Bank PCL

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bangkok Bank PCL has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent essential indicators, Bangkok Bank is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Charoen Pokphand and Bangkok Bank

The main advantage of trading using opposite Charoen Pokphand and Bangkok Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Charoen Pokphand position performs unexpectedly, Bangkok Bank can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Bangkok Bank will offset losses from the drop in Bangkok Bank's long position.

The idea behind Charoen Pokphand Foods and Bangkok Bank PCL pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.